Effect of a State Social
Insurance Plan on State
Medicaid LTC
Lawrence H. Nitz, Professor
The University of Hawaii at Manoa
lnitz@hawaii.edu
Lisa Alecxih, Vice President Long Term Care
The Lewin Group
Lisa.alecxih@lewin.com
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
1
Hawaii CARE PLUS 2002-2003
• In 2002-2003 the Hawaii State Legislature passed a bill
authorizing creation of a LONG TERM CARE (LTC) trust
fund
• The fund was to be financed by an initial $10/month
income tax surcharge on every Hawaii tax filer over the
poverty line
• The benefit package was intended to cover
approximately 75% of the care needed by a typical LTC
user, in home or community care, initially 365 days at
$70/day
• The right to benefits was to accumulate over a ten-year
period, with 1/10 of the face benefit added for each year
of participation.
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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Basic Assumptions
• The staged acquisition of benefit rights, together with an initial
3 year delay of start of benefits will serve to deter “LTC
Tourism”
• Low income workers should not be taxed for LTC benefits that
they may qualify for under various Medicaid programs
• The LTC tax should be spread over the population for the
entire exposure period, the whole life, rather than limited to
working years
• The program should be a pay-as-you-go system to restrict
the size of reserves required, since the whole population
would be covered
• A separate legal entity, with its own qualified trustees, should
be established to limit the possibilities of legislative raids on
the Fund
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
3
Simulation Methodology
• Applied a version of the Brookings-LewinICF Long Term Care Financing Model
customized for the Hawaii Population
• Built a Base Case for current conditions in
which private LTC insurance is sold with
marketing assistance no stronger than
communication and tax credit support
• Built a Social Insurance Case in which the
proposed program was introduced
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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Overview of Results
•
•
•
•
•
Prospective population served
Aggregate benefits to be paid out
NH patient usage of social insurance LTC
Coverage of social insurance LTC
Proportion of LTC costs paid by Medicaid by
family income
• Proportion of LTC costs paid by Medicaid by
family assets
• Payment of LTC costs by social insurance,
compared to base case payment by private LTC
insurance
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Academy Health Annual Research
Meeting, Boston, MA
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28000
24000
20000
16000
12000
8000
4000
0
Persons Served
Base Case
6/27/2005
Persons Served
Social Insurance
Academy Health Annual Research
Meeting, Boston, MA
9
320
280
240
200
160
120
80
40
0
Social Insurance
LTC Coverage
6/27/2005
Base Case LTC
Insurance
Academy Health Annual Research
Meeting, Boston, MA
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Figure 3
Effective Social Insurance Impact
Percentage of NH Population using Social Insurance
Benefit
70
60
50
40
30
20
10
0
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
Program Year
NH with Social Insurance
6/27/2005
NH with Market Insurance
Academy Health Annual Research
Meeting, Boston, MA
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Figure 4
LTC Social Insurance Coverage
120
ercentage of Population Covered
100
80
60
40
20
0
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
Program Year
Social Insurance
6/27/2005
Base Case
Academy Health Annual Research
Meeting, Boston, MA
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Figure 5
Medicaid Effects by Family Income
Medicaid, Base Case
LTC Social Insurance
Percentage of NH Costs Paid by Medica
100
90
80
70
60
50
40
30
20
10
0
<7500 7500 - 15000 20000 30000 40000 50000+
15000 - 20000 - 30000 - 40000 - 50000
Family Income
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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Figure 7:
Payment by LTC Insurance in Base and Social Insurance Cases
Private LTC Insurance, Base Case
LTC Social Insurance
Percentage of NH Costs Paid by LTC Ins
20
18
16
14
12
10
8
6
4
2
0
1- 30
3160
6190
91364
1-2
Y
2-3
Y
3-4
Y
4-5
Y
5+ Y
Length of Stay
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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Conclusion
• Social insurance spreads benefits to the middle
class
• It is possible to target a specific risk segment of
the care continuum, in this case the early care
portion
• General financial payments for early care might
in fact be used to subsidize family NH expenses
– Increasing expenditures from family funds
– Increasing use of paid care where voluntary care had
been used previously
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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Reservations
• Private insurers make systematic efforts to carve out portions
of the social insurance domain, with associated underwriting
exclusions
– The social insurance proposal reserved the entire segment
of care beyond 365 days for the private insurance sector
• Lifestyle of community may affect the woodwork effect of
unanticipated demand for care
– German program apparently affected by concentration of
city residents in 2 & 3 room apartments
• Political leaders may not trust themselves or their successors
to appoint appropriately fiduciary trustees for such an LTC
fund
• Broad expectation that everyone paying premium actually
draws cash benefits, contrary to idea of insurance
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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References
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Alecxih, L. M. B. (2003). The Estimated Impact of Alternative Long Term
Care Financing Proposals. Testimony before the Hawaii State Legislature.
Honolulu, HI, The Lewin Group.
Alecxih, L. M. B., J. Corea, et al. (1992, 2002). Long Term Care Financing
Model: Model Assumptions. Alexandria, VA, The Lewin Group.
LIMRA International and the Society of Acuaries, Long Term Care
Experience Committee. (2004). Long-Term Care Insurance Persistency
Experience. Windsor, CT, LIMRA International, Inc.
Executive Office on Aging, O. o. t. G. (1991). Financing Long Term Care: A
Report to the Hawaii State Legislature. Honolulu, HI, Executive Office on
Aging, Office of the Governor.
The Lewin Group. (1990, 2003). The Brookings-Lewin-ICF Long Term Care
Financing Model. Arlington, VA, The Lewin Group.
Hottinger, M. (2003). Testimony on Administration of Proposed LTC
Financing Act. Honolulu, HI, Hottinger Consulting.
6/27/2005
Academy Health Annual Research
Meeting, Boston, MA
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•
•
•
•
•
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McCall, N. (2001). Who Will Pay for Long Term Care? Insights from the
Partnership Programs. Washington, D. C., Academy for Health Services
Research and Health Policy/Health Administration Press.
Meiners, M. (2001). Reflections of a Partnership Insider on Long Term Care
Financing. Who Will Pay for Long Term Care? Insights from the Partnership
Programs. N. McCall.
National Center for Health Statistics. (1984). National Nursing Home
Survey. Hyattsville, MD,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Centers for
Disease Control and Prevention.
Nitz, Lawrence H. Two Tails of Social Insurance for Long Term Care: Hawaii
1992 and 2002.
Midwest Political Science Association, Chicago, IL,
April 15, 2004.
White House Task Force on Health Reform, L.-T. C. W. G. (1993). LongTerm Care, Working Group Draft. Washington, D. C., Government Printing
Office.
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Academy Health Annual Research
Meeting, Boston, MA
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